GTAP stands for
Global Trade Analysis Project, a global network of researchers and policy
makers conducting quantitative analysis of international policy issues. The key
product of the network is the GTAP database describing the entire economies of
87 countries or regions[1] in terms of 57 sectors, as well as all bilateral trade flows
between these regions. This database forms the basis for a range computable
general equilibrium (CGE) models that start from the same theoretical framework
but are adapted to addressing different economic contexts or research
questions.

[1] The number of regions in the database is increasing with every
release as regional aggregates are split in individual countries when the
necessary data are contributed to the GTAP network. The next release (version
7) is expected to have 104 countries/regions.

What can a GTAP model do?

Not surprising given its name, the majority
of models using the GTAP database focus on assessing trade policies. In the
current World Trade Organization (WTO) negotiations on reducing barriers to
international trade, about all quantitative analyses of possible agreements use
a CGE model based on GTAP data. These assessments can provide indications of changes
in, for example, production by sector at national level, trade flows between
countries, consumption at national level, tariffs and tax incomes, wages and
prices, and welfare impacts of a change in trade policy.

The prominent role of GTAP in the trade
policy debate has inspired further developments of the database and models to
deal with changes over time (the regular model is static and thus does not
provide trajectories of changes over time), international migration (capturing
the flow of persons and remittances between nations), energy use (capturing the
impact of biofuels in relation to developments in markets for non-renewable
fuel) and climate change. For the latter additional databases are developed
with more detail on land use (production by agro-ecological zones in each
region) and carbon sequestration. The latter developments have led to an
increasing role of GTAP-based analyses in the Intergovernmental Panel on Climate Change (IPCC) to assess
policies for limiting greenhouse gas emissions.

What is the role of GTAP in SEAMLESS?

Within SEAMLESS GTAP
serves as a complement to the EU and global level analyses of SEAMCAP that are
limited to the agricultural sector. By combining the two models we obtain
detailed modelling of the agricultural sector from SEAMCAP while accounting for
feedback loops between agricultural and non-agricultural sectors from GTAP.
GTAP thus accounts for changes in the rest of the economy which may affect
agriculture, for example by rising wages, increasing the costs of inputs like
fertilizer that are produced by the chemical industry, or by changing demand
for agricultural goods because of changes in income of consumers.

What GTAP model is used in SEAMLESS?

In the context
of SEAMLESS, the standard GTAP model as maintained by the GTAP center is used.
This model has been adapted in terms of sectors and regions to obtain the best
possible fit with SEAMCAP. A region can be an individual country (like all 27
EU member states) or a group of countries (like sub-Sahara Africa).
In total, the GTAP model contains 55 regions, which include all 27 EU member
states as individual countries.

For every region
in the model there is a single representative household demanding consumption
goods (including savings) on the behalf of all private households and a
government (Figure 1). Total demand is determined by income earned by land,
labour and capital as well as income from taxes. The demand for goods can be
met by national producers or by imports. For each sector there is a single
producer, i.e. there is a one producer of agricultural goods, one for labour
intensive manufactured goods, one of services etc. Since SEAMCAP models
agriculture in detail, all agricultural sectors in GTAP are aggregated to a
single agricultural sector.

Figure
1. Simplified illustration of a regional model
within the GTAP model.

The model traces
trade between all regions in the model and accounts for trade barriers between
regions through inclusion of tariffs (Figure 2). These tariffs may drive a
wedge between prices in regions, i.e. the same product may be more expensive in
one region than in another because of tariffs. Whereas international trade is
modelled by tracing all bilateral flows international capital flows are
governed by a global bank. This bank collects savings and uses these for
international investments. Since savings are pooled by the global bank before
being sued for investments there is no tracing of bilateral capital flows.

Prices of goods
and of land, labour and capital in each region adjust to assure that both
national and international demand and supply are equal, hence the term general
equilibrium models. Thus when a policy simulation is run, for example lowering
tariffs between regions, the model computes by sector for each region
production, consumption and trade (both imports and exports) as well as price
levels that result in equilibrium at national and international markets.

Figure
2. Simplified illustration of links between
regional models in the GTAP model.